The International Monetary Fund (IMF) released its October 2024 World Economic Outlook, projecting global growth to remain stable yet underwhelming at 3.2% for 2024 and 2025. These projections are virtually unchanged from the estimates provided in the July 2024 World Economic Outlook Update and the April 2024 World Economic Outlook. However, notable revisions have occurred beneath the surface, with upgrades to the forecast for the United States offsetting downgrades to those for other advanced economies, particularly the largest European countries. Likewise, in emerging markets and developing economies, disruptions to the production and shipping of commodities, especially oil conflicts, civil unrest, and extreme weather events, have led to downward revisions to the outlook for the Middle East and Central Asia and that for sub-Saharan Africa. These have been compensated for by upgrades to the forecast for emerging Asia, where surging demand for semiconductors and electronics, driven by significant investments in artificial intelligence, has bolstered growth. The latest forecast for global growth five years from now at 3.1% remains mediocre compared with the pre-pandemic average. Persistent structural headwinds such as population aging and weak productivity are holding back potential growth in many economies. 

Cyclical imbalances have eased since the beginning of the year, leading to a better alignment of economic activity with potential output in major economies. This adjustment is bringing inflation rates across countries closer together and, on balance, has contributed to lower global inflation. Global headline inflation is expected to fall from an annual average of 6.7% in 2023 to 5.8% in 2024 and 4.3% in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies. As global disinflation progresses, broadly in line with the baseline, bumps to price stability are still possible. Goods prices have stabilized, but service price inflation remains elevated in many regions, pointing to the importance of understanding sectoral dynamics and calibrating monetary policy accordingly, as discussed in Chapter 2.
 
 Risks to the global outlook are tilted to the downside amid elevated policy uncertainty. Sudden eruptions in financial market volatility, as experienced in early August, could tighten financial conditions and weigh on investment and growth, especially in developing economies where large near-term external financing needs may trigger capital outflows and debt distress. Further disruptions to the disinflation process, potentially triggered by new spikes in commodity prices amid persistent geopolitical tensions, could prevent central banks from easing monetary policy, which would pose significant challenges to fiscal policy and financial stability. Deeper or longer than expected contraction in China’s property sector, especially if it leads to financial instability, could weaken consumer sentiment and generate negative global spillovers, given China’s large footprint in global trade. Extinguishing protectionist policies would exacerbate trade tensions, reduce market efficiency, and disrupt supply chains. Rising social tensions could prompt social unrest, hurt consumer and investor confidence and potentially delay the passage and implementation of necessary structural reforms. 

As cyclical imbalances in the global economy wane, near-term policy priorities should be carefully calibrated to ensure a smooth landing. In many countries, shifting gears on fiscal policy is urgently needed to ensure that public debt is on a sustainable path and to rebuild fiscal buffers; the pace of adjustment should be tailored to country-specific circumstances. Structural reforms are necessary to lift medium-term growth prospects, but support for the most vulnerable should be maintained. Chapter 3 discusses strategies to enhance these reforms' social acceptability, a crucial prerequisite for successful implementation. Multilateral cooperation is needed more than ever to accelerate the green transition and to support debt-restructuring efforts. Mitigating the risks of geoeconomic fragmentation and strengthening rules-based multilateral frameworks are essential to ensure that all economies can reap the benefits of future growth.

Download the World Economic Outlook October 2024 here

For feedback and further information, kindly contact [email protected]

Subscribe to our market intelligence notes for updates. Thank you.